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The Rough Notes Company Inc.

BAD HAIR DAY

BAD HAIR DAY

July 26
09:22 2021

Bad hair day

Pro’s Choice Beauty Care, Inc., purchased commercial general liability insurance from Great Northern Insurance Company. Nonparty Bumble and Bumble commenced an action against Pro’s Choice to recover damages and for injunctive relief based on trademark infringement. Pro’s Choice tendered notice of the action to Great Northern, and the insurer disclaimed coverage. Pro’s Choice ultimately settled the trademark infringement action.

Pro’s Choice commenced an action against Great Northern to recover damages for breach of contract and for certain declaratory relief. Great Northern moved for summary judgment, in effect declaring that it was not obligated to defend or indemnify Pro’s Choice in the trademark infringement action, and Pro’s Choice cross-moved for summary judgment on the issue of Great Northern’s liability for defense costs. The supreme court of Suffolk County, New York, denied the motion and the cross motion. Pro’s Choice appealed, and Great Northern cross-appealed.

On appeal, the appellate division of the supreme court of New York noted that the policy provided coverage for advertising injury. There was no dispute between the parties that the trademark infringement action contained allegations of an advertising injury as defined in the policy.

The court noted, however, that the policy excluded coverage for “advertising injury arising out of, giving rise to, or in any way related to any actual or alleged … infringement or violation by any person or organization (including the insured) of any intellectual property law or right.” Intellectual property was defined by the policy to include trademarks. The complaint alleged, among other things, that Pro’s Choice counterfeited and infringed on another’s trademark and engaged in the sale and distribution of offending goods. Under these circumstances, Great Northern satisfied its burden of demonstrating that the exclusion applied.

The exclusion contained an exception that provided: “This exclusion applies, unless such injury: is caused by an offense described in the definition of advertising injury; and does not arise out of, give rise to or in any way relate to any actual or alleged assertion, infringement or violation of any intellectual property law or right, other than one described in the definition of advertising injury.” According to the court, Pro’s Choice failed to demonstrate that the exception to the exclusion applied because the complaint in the underlying action contained allegations unrelated to advertising injury. Because there was no legal basis on which Great Northern could be held liable for coverage, it had no legal obligation to defend or indemnify Pro’s Choice. Accordingly, the lower court should have granted Great Northern’s motion for summary judgment. The matter was remitted to the lower court for entry of such judgment.

Pro’s Choice Beauty Care, Inc., v. Great Northern Insurance Company—New York Supreme Court, Appellate Division, Second Department—January 20, 2021—No. 2018-10274.

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